What Asian Banks Can Teach About COVID-19 Responses

Banks across Asia, particularly in China, have been dealing with the COVID-19 coronavirus for months, giving them a crucial head start on their peers in the US and Europe, according to a new report.

Research published earlier this month by global consulting giant McKinsey set out how Asian banks have faced operational challenges and what actions they have taken to support customers.

“Their actions could offer a valuable template for banks around the world that are still amid the crisis and experimenting with initiatives,” McKinsey said. “By focusing on three imperatives—ensuring business survival, fulfilling social responsibilities, and adapting to the new normal—banks can minimize disruption and continue to provide vital services to their customers."

The consultancy firm highlighted that many financial institutions quickly formed dedicated units responsible for managing their response to the outbreak.

Banks also had to adapt their digital resources to enable remote working. McKinsey said all banks should assess staff roles and prioritize those that require specific resources and security measures, such as staff handling sensitive data.

It cited the example of one south-east Asian bank that set up a remote working program for its 125-person product development team over the course of two weeks.

“The team first implemented no-regrets moves, such as reinforcing best practices in handling data, and then defined a clear set of actions across key operating models to enable fully remote work,” McKinsey said. “The actions were shaped by various business-continuity planning scenarios, ensuring operational continuity while supporting similar levels of productivity.”

The spread of the virus also accelerated banks’ efforts to launch and expand mobile and online services, McKinsey explained.

“Asian banks not only leaned more heavily on existing digital channels to enable contactless customer engagement but also accelerated the path to digitized core-banking processes such as electronic know your customer (eKYC), digital signature collection, and online document submission,” the consultancy said.

Ping An Bank in China introduced a ‘Do It At Home’ campaign to promote its online and app-based services. Within two weeks, more than 3 million customers had made nearly 12 million transactions, McKinsey reported.

The consultancy firm also emphasized the importance of banks’ executive leadership groups taking measures to assess liquidity positions and decide how to prepare for the difficult conditions ahead.

“Some fast-acting banks developed a short-term liquidity plan and updated contingency plan, created full transparency on liquidity positions (such as through an intra-day dashboard), identified major accounts by materiality, and started negotiations with customers early,” McKinsey said.

“Depending on the severity of the situation, some other actions may have included canceling transactions, settling early, and trade compression if required; mobilizing trading and nontrading assets to be used as collateral; and utilizing support from government programs.

“Over the medium term, banks should review their liquidity models to incorporate a variety of financial scenarios.”

Within branches, offices and call centers, Asian banks took measures such as reducing opening hours or closing branches altogether, enhancing ATM services, and stepping up deep-cleaning programs. Similar measures have been taken by banks across the US.